Borders need to open for talent to move up the high-tech value chain: Synopsys Chairman

The $2.4 billion (revenue) global software firm is finding it a challenge to fill positions in Sri Lanka

Sri Lanka needs to build a critical mass of skills to attract investments further up the high-tech value chain, says Aart de Geus, founder chairman of Synopsys, a $2.4 billion revenue firm founded in 1986 that primarily develops software that designs electronic circuits.

The global electronic circuit industry has boomed ever since 1965, when Gordon Moore predicted that the number of transistors per square inch of circuits would double every 18 months. Many now predict a slowdown, but de Geus still sees growth in tech with software taking over the driving seat from hardware.

Over the years, Synopsys, listed on the Nasdaq, a US stock exchange, has acquired nearly 60 businesses including several that verify software that drives Internet of Things, autonomous cars, smart wearables and medical devices, secure financial services, machine learning, and artificial intelligence. “We used to be focused on the hardware side of tech, now we’re in the software-end as well,” de Geus says.

The company runs a small, 100 person-strong operation in Sri Lanka, compared to its worldwide staff count of over 11,000. The co-founder of Synopsys is impressed with Sri Lanka’s potential, but de Geus says easing restrictions on employing foreigners is critical for growth.

Excerpts from the interview are as follows:

What’s Synopsys’ plan for Sri Lanka?
● de Geus: Sri Lanka appears to be a good location with a strong, motivated and capable team in a country that’s increasingly changing for the positive. While I have much more studying to do about a future role here, the initial impressions are positive. Our team in Sri Lanka conducts some sophisticated tests on chip designs. It’s like checking the plans of a house. Many costly problems can be avoided just by verifying the plans and fixing design flaws.

Why did Synopsys invest in Sri Lanka? Do you plan to expand the business here?
● de Geus: We didn’t invest here. The Sri Lankan operation was inherited when we acquired Atrenta in 2015.

When I met the staff and public officials here, they all asked me what more Synopsys can do in Sri Lanka. Currently, we have quite a number of open positions to be hired. We recruit many graduates, but this is not enough. The challenge is filling positions that require more experience. We may have to hire from outside Sri Lanka. I’ve been told this is not easy. In Silicon Valley, half the management is immigrants. If you want to move up the value chain, you have to move up in terms of experience and skillsets, and invest in these. This is true for any location. You cannot be experts overnight unless you can create critical mass for that. This is a critical notion that can be achieved by leveraging foreign firms. Domestic companies, governments and academia need to team up to drive for change in that direction.

As chips get smaller, it’s costlier to make; does this mean Moore’s Law is reaching its end?
● de Geus: Moore’s law turned out to be a very good prediction. Gordon Moore, who used to be the chairman of Intel, made a prediction that we would have twice as many transistors in a given chip every 18 months.

What was a prediction soon became a mandate. Chip makers pushed the technology so they didn’t get left behind every 18 months. As a result, the industry lived up to Moore’s Law, making it a self-fulfilling prophesy. As you can expect, it becomes difficult to produce smaller and smaller transistors. From time to time, people predicted the end of Moore’s Law, even as far back as the 1990s, but it never died.

Engineering ingenuity has often found ways to get around technical problems: if you cannot make transistors smaller, what about stacking them vertically? Well, that’s exactly what happened. However, it is true that we’re reaching a limit. We will still get much further, but it will get more expensive to develop smaller transistors; the return on investment is also getting smaller.

However, the other way to get more out of chips is to stack them together in packages that address specific functions. I would say that, for the next 10-20 years, a combination of hardware and software advancing together will deliver an exponential impact.

What does this mean for Synopsys? What does the future hold for the company?
● de Geus: Synopsys is fortunate to be in the middle of hardware and software.

Synopsys started out by developing software for designing chips. Since then, we have moved further down, and further up, the value chain. We are about a $2.65 billion revenue company, and the new businesses we’ve invested in over the last five years are growing rapidly. Let me highlight two of them. One area is developing prototypes so software can be tested before the hardware is ready. Essentially, we have machines that mimic what a chip will do long before it (the chip) is manufactured. We run the software on the prototype to identify any bugs that need to be fixed before the actual chips are made. This is an important business, and it’s growing.

The future of electronics will be driven less by hardware and more by software. Already, most devices—like smartphones—are more like software machines that happen to store data somewhere in the hardware. The global tech industry is increasingly moving in this direction, into the Internet of Things and artificial intelligence. So, it’s critical to test the software before making the hardware. Timing is critical in this industry. If you have to develop the hardware, then wait to start on the software, it takes a long time. But, if you could develop the software before the hardware is ready, it saves time. That is an area that we are the leader in, and the business is growing rapidly.

The second area is software verification. If the software has a bug, what do you do? You send out a patch. What if the patch has a bug? You send out another patch. This is why many apps are frequently updated. Over time, that needs to become more solid; so, we decided to venture into software verification. We acquired six or seven companies over the last three years, emerging as the leader for helping people design clean software.

Previously, we were dealing with semiconductor and electronics companies; now, software is everywhere. Today, our clientele includes oil, energy, healthcare and financial services companies. Today, 19 of the top 20 global financial institutions are our customers.

We have clients in stock exchanges and automotives—an advanced car has 100 million lines of code. In many ways, Synopsys is following the center of gravity of the advanced tech industry, which is more towards the software but leveraged by the most advanced hardware.

How did you conceive Synopsys?
● de Geus: So many things started by accident. I worked at GE and headed a group that developed advanced chip designing tools. GE was in the silicon conductor industry, with a desire to become a high-tech firm. However, in 1985, the industry was in a downturn and GE decided to wind up its chip business and lay us off.

I did a few interviews and discovered that the tech developed by my team was innovative, and with just two members of the team, hatched a plan to create a company. I made an offer to GE: a stake in the company in exchange for the technology. GE offered $600,000 in technology and $400,000 in cash. They wanted us to raise $5 million on our own. The first $1 million came in two weeks from another tech company that was familiar with what we were doing. So I thought ‘This is going to be easy!’, but it was absolutely not. I was still a kid making pitches over the phone. Most people had no idea what we were talking about; those that did could barely pay for lunch. So, it took a while before two venture capital investors showed an interest. For the VC companies, the fact that GE and Harris SC were willing to invest gave them the sense that the tech was okay. Whereas for GE and Harris, the fact that VCs were investing gave them comfort that there was a business opportunity. This taught me a fundamental lesson that one should always look at risk management. Risk is the biggest driver for people when making decisions. We finally got it all going; we started in North Carolina, and within nine months moved to Silicon Valley because that’s where are our customers, schools, management and VCs were.

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Have the risks changed from then to now?
● de Geus: The risks are always the same. The rate of change is extremely high that, by the time you notice, it started changing a long time ago. So, I have always been super paranoid about what we don’t know. We can be proud that, in 30 years of existence, 80% of our products have always been state-of-the-art; in that sense, we are the other half of Moore’s Law. Manufactures should take the credit for the smaller transistors. We should take the credit for the tools that make them usable. So, that fear is never gone. The thing that has changed is that we are now a much larger company, and subject to global fluctuations and markets that can just disappear. Simultaneously, we’ve seen many of our customers merge, and become larger and more powerful.

How will protectionism in the US under the Trump presidency and Brexit impact a company like Synopsys?
● de Geus: So far we are not affected by Trump or Brexit. Brexit was a road accident where they voted without knowing what it was about. I don’t know what’s going to happen, but I wouldn’t be surprised if they decide to vote again at some point. The US is potentially isolating itself, but this is trickling from one president and may not last longer than just one term in office. I hope it doesn’t. What we’re seeing throughout the world is that some countries are retrenching because they have internal challenges such as uneven distribution of wealth, and this is making them xenophobic. I am a strong believer that we are a global society, and people who are advocating differently come across as people saying the world is flat. If countries become overly protective about intellectual property or start battling each other on taxation, it can be challenging for companies like Synopsys.

When borders close on immigrants, the countries that do so forfeit the opportunity to build on their intelligence and their desire to make an impact. Sometimes, countries may need to be careful for good reasons, but when it’s coupled with narrow mindedness, it’s never healthy.